When The Supreme Court Weighs In, Investors Better Pay Attention

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Things got a little tougher for the Bush White House yesterday, when the Supreme Court effectively slapped it on the wrist for its position on climate change by ordering the EPA to justify its lack of action on the climate file with substantive arguments (i.e. the Court buys the IPCC‘s story rather than Bush‘s). Things Just Keep On Piling This ruling adds to a long list of recent events that render it increasingly difficult for climate nay-sayers to hold the fort. The most significant such events are: (a) one of the top Republican politicians in the land signing into law one of the most stringent set of greenhouse gas reduction targets in the world; (b) a group of large and well-respected American companies banding together to demand action on climate change; (c) Wall Street writing report after report on how to capitalize on climate-driven opportunities and protect from climate risks; (d) the top climate scientists in the world effectively settling the scientific debate for most folks outside of the conspiracy theory community; (e) a record private equity deal in the utilities industry being made partially contingent on abandoning plans to build a whole slew of coal power plants on grounds that the potential regulatory risk is too great. These are only a few of the items to have hit the North American climate change newswire in the recent past. I would be remiss if I didn’t also mention new and ongoing regulatory initiatives at the state and regional levels in the East and in the West. Tobacco All Over Again? Besides their successes on the political side, those in favor of action on climate change got, with this ruling, the biggest push they could have ever hoped for to forge ahead with their battle on the legal side – a battle some have compared to the infamous tobacco lawsuits. While I wouldn’t go as far as to say that successful tobacco-style lawsuits (and payouts) are right around the corner for climate change, this certainly sets an interesting precedent as the Court pretty much sided with most of the scientific community on the causes and potential impacts – a slap in the face of the so-called “skeptics” (of whom the Bush White House can be said to be a part of) who were basing their arguments on purported scientific uncertainties. What’s The Big Deal For Investors? If the TXU deal was no wake-up call for you as an investor, hopefully this triggers some red lights. Climate change is no longer some abstract debate between environmentalists and conservative ideologues – it has now spread from the realms of science and politics into that of investing, and certain companies (and their stocks) could get hit hard in the medium term. As I’ve argued here before, those with sufficient foresight to position themselves appropriately for this should do well. I think it is also becoming increasingly evident that those who choose the old ostrich approach could receive unpleasant news in the not-too-distant-future.


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